A company uses the periodic inventory method and the beginning inventory is overstated by $7,000 because the ending inventory in the previous period was overstated by $7,000.The amounts reflected in the current end of the period balance sheet are

Question

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Since the beginning inventory is overstated by $7,000 and there are no other adjustments, the cost of goods sold (COGS) will be understated by $7,000. This means that the ending inventory will be overstated by $7,000, as reflected in the current balance sheet. To correct the error, the ending inventory should be reduced by $7,000. Choice B is the only option that reduces the ending inventory by $7,000.

A Company Uses the Periodic Inventory Method and the Beginning